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Friday, September 14, 2012

QE3 effect pushes US dollar lower

NEW YORK: The
Federal Reserve's open-ended QE3 stimulus and a rise in eurozone
confidence pushed the US dollar lower on Friday, passing the $1.31 per
euro line for the first time since early May.

The impact of the
stimulus programme announced on Thursday continued to shake through
markets, leaving the euro back in its early-2012 range after sinking to
close to $1.20 in late July.

At 2100 GMT the euro was at $1.3127, up 1.41 cents from Thursday.

The dollar also fell against the yen, to 78.37 yen from 77.48 yen, and the Swiss franc, which traded at 0.9272 to the dollar.

The British pound continued its climb higher, too, to $1.6220 from $1.6152.

The euro meanwhile pushed higher on the yen, to 102.90 yen from 100.61 Thursday.

"The US Dollar is taking a beating in virtually every asset class due to the Fed's QE Infiniti plan," said Neil Gilbert of GFT.

"The
reason for this beat-down is that the Fed will be injecting additional
capital into the current money supply, increasing the number of dollars
available, and in turn, decreasing the value of each dollar that is
currently out there, to the tune of $40 billion per month."

"The question now becomes, how long will this last?"

Some analysts were beginning to doubt that it would go on much longer.

"We
have been neutral on the euro for some time, expecting a short-covering
rally on the back of removal of tail risk, and positive resolution of
key European event risk," said Jens Nordvig of Nomura Global FX.

"But
with euro-US dollar now at $1.31, and with a number of positive event
risks behind us, we think it is time to start fading Euro strength
again.

"Given yesterday's QE announcement, is possible, however,
that the dollar will continue to trade weakly on a global basis for a
little while," he added.